Cryptocurrency and Indian Regulatory Environment: Generation Gap or Central Bank Dharma?

Abstract

It may not be an exaggeration to say that excitement on crypto-currencies / crypto-assets of generation Y (or Z, may be) has not necessarily been shared by the global regulators, perhaps belonging to an earlier generation. Christine Lagarde, then Managing Director of the International Monetary Fund (IMF) compared the “dizzying gyrations of crypto-assets such as Bitcoin” with the “tulip mania that swept Holland in the 17th century and the recent dot-com bubble”, and went on to say, “With more than 1,600 crypto-assets in circulation, it seems inevitable that many will not surviveia the process of creative destruction.”5 While the initial idea of crypto-currency perhaps dates back to 1998 when Wei Dai first discussed the idea of digital money named “B-money”, for all practical purpose its popularity / emergence can be traced since October 2008, when a presumed pseudonymous developer(s) Satoshi Nakamoto published a nine-page paper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System” (https://bitcoin.org/bitcoin.pdf). 6 In broad terms, a cryptocurrency is a virtual or digital money that takes the form of tokens or “coins.” The prefix “crypto” owes its origin to complicated cryptography that allows for the creation and processing of digital currencies and their transactions across decentralized systems. Primarily, cryptocurrencies are developed as code by teams who build in mechanisms for issuance (often through a process called “mining”) and other controls. Over the last five years Bitcoin price has increased more than 700 times; and there are at least 35 Bitcoin exchange markets where Bitcoin prices are quoted in standard currencies, each with the daily transaction volume above one million USD (Pichl and Kaizoji, 2019).7